Ally Bank Has an CD That Raises Your Rate

By Sun

Ally Bank now has a new CD product, the second new product in as many month.

The CD product, called 2 Year Raise Your Rate CD, isn’t entirely because it replaces the current 2-year high-yield CD which has a yield of 2.04% APY as of March 9th. What’s new in this product is the promise that if the yield goes up within the term of the CD later, you will have the opportunity to increase the rate of your CD once.

Like its online savings account, Ally Bank’s CDs are quite competitive among banks offer high-yield savings accounts. For example, for the same term CD, we have

EverBank 2-year CD 2.00% APY

American Express Bank 2-year CD 2.00% APY

Capital One Bank 2-year CD 1.25% APY

Discover Bank 2-year CD 2.05% APY

FNBO Direct 2-year CD 1.50% APY

While the idea of letting customers opt to a higher rate in the future is interesting, I don’t know how much savers can benefit from it in the current environment. If you also follow Ally Bank, you know Ally is the only bank which adjusts its rates, both savings account rates and CD rates, almost every week. I have complained about this many times in the past, but still couldn’t figure the rationale behind such frequent adjustments.

After the latest policy meeting in February, the Fed said it will maintain the interest rate at near zero for some time. This means that interest rates of bank savings and CD products could still fall in the coming months even when the Fed keeps its benchmark rate steady (the current rate has been in place for more than a year already). Even if the rate starts to go up, I suspect that Ally will use the same tactic as it’s using now when lowering rates: make tiny but frequent adjustments. In that case, you probably won’t get a rate that’s a lot better than what you already have before the term expires if you use your chance too early.

BTW, I have already received the debit card from Ally interest checking account that I opened last week. Now I am just waiting for the PIN before I can use it to withdraw cash from any ATM without a fee.

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